Tuesday, September 23, 2008

Seven Hundred Billion

The New York Sun has told the public that, in the absence of a capital infusion by additional supporters, it will cease publication at the end of September. The Sun has been an enormous gift to the civic and cultural communities during the six and one-half years it has been in existence.

These are hard times for newspapers in general, with readers and advertisers switching to electronic means of communication. I love to read the printed word, and particularly value the Sun for its intelligence and the variety of viewpoints it offers.

The Sun has been a valuable source of information about all three levels of government. It is not in anyone’s pocket. I hope the newspaper can be saved, and if any of our readers has the means to be helpful, please call Seth Lipsky at the Sun.

Will TARP keep us dry, or hang us out to dry?

The $700 billion bailout of America’s financial institutions is called TARP (Troubled Asset Relief Program) by its proponents, President Bush and Treasury Secretary Paulson (most recently chairman of Goldman Sachs). To its critics, it stands for (Total Abdication of Responsibility to the Public). Whether the acronym was intended or not, tarp is a short form of tarpaulin, which is a strong water-resistant covering, thrown over an object for protection from bad weather or other hazards. (BTW, the USA PATRIOT Act was a farther-fetched acronym: Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act. It was passed in October 2001, shortly after 9/11.)

6 comments:

Market forces will take over and real estate and other assets will be sold for their true value. If your stock used to be worth $1 thousand when the NY Times sold for a dollar but your stock is now worth $100 when the Times sells for a dime, you have not really been hurt in terms of buying power.

2. Wall Street and Washington is screwing Mr. and Mrs/Ms America. I am losing my ass in the market. All on those financial's that we were told were wonderful investments. It has set me back a bundle. Who is to blame. As I said Wall Street, Washington, and the brokerage bull .... from the pundits and their CEO's.They retire with Golden Parachutes and we retire with a parachute that does not open.

The $700 billion financial system bailout has so far stabilized the financial markets. That part is hard to debate. The long term effects, the path, and the implications are, of course, up for debate. The questions in many discussions this weekend were what the real costs would be and whether or not these institutions should be allowed to fail.

Let us hope that Messrs. Chris Dodd and Barney Frank et. als. will realize too that the purpose of a TARP is not only to protect what is covered, but also simultanesouly to conceal from public view that which transpires under its cover.

Their idea that the malefactors who brought this situation to bear should not be unjustly enriched, nor escape sanction, has merit. So too does their skepticism about proposals emanating from veterans of Goldman Sachs who now hold positions of public trust, who during said public tenure, appear to have been almost as concerned about the trajectory of the economy as was Captain Lord at the held of the RMS Tititanic.

Alas, legislation like sausage, in the end may be something to be admired even if you're not Karl Ehmer, but the process is frequently disgusting to view even if it's covered up with a tarp.

5. I am just a few years your junior, born and raised in Manhattan. Never before have I been so despondent about our country and it's government. I wish more citizens really understood what is happening and were aware of the history that you are so good at reminding us of.

BTW, In yesterday's piece you made reference to typing in 'as this sentence is being typed'. Is it still acceptable to use that term or am I more appropriately 'key boarding' as I write this? (Typing does sound less awkward and much better.)

6. Based on my experiences at HUD and elsewhere, I strongly disagree with your statement.

My brief summary -- of the cause of the failure -- accepted by both liberals and conservatives, is the following:

The fundamental cause was the decades-old, bipartisan government policy of encouraging home ownership by people who can't afford to own their homes or make reasonable down payments. This policy culminated in the Community Reinvestment Act, which promoted bald lying by loan applicants, mortgage-loan originators, predatory mortgage lenders, and assessors, thereby leading to inflated mortgages in the easy–money environment created by the Federal Reserve. With so much cheap money around, others also piled into housing as a sure-fire investment, and prices soared. Fannie Mae and Freddie Mac swelled to gargantuan proportions by happily insuring these risky mortgages and bundling them with sound mortgages, . They were supported by members of Congress who received millions from them in campaign contributions, while the Clinton-appointed officials garnered large bonuses based in part on fraudulent earnings statements. Financial engineers devised opaque instruments to hedge and distribute the risk posed by the loans. Financial firms sold these new, high-profit products enthusiastically. The result was a monstrous housing bubble that inevitably burst and a series of financial disasters that started with the subprime-mortgage meltdown. Government accounting regulations (“mark to market”) hastily imposed after the Enron swindle guaranteed a downward spiral for AIG and others when there were no immediate buyers for their assets, although these were, in fact, quite valuable.